As part of a $100 million cost reduction strategy, Sovereign Bancorp will exit the wholesale mortgage market.
Less than 100 of Sovereign's 150 wholesale mortgage employees will lose their jobs through the closing of three offices in Indiana, Georgia and California in March, spokesman Ed Schultz told MortgageDaily.com.
The decision to shutdown the wholesale mortgage operations forms part of the Philadelphia-based company's announcement today that its board approved $100 million in cost cuts involving a reduction in workforce, consolidation of support groups, exit of business lines performing below expectations and contract renegotiations.
About $50 million of the cost reduction strategy will be generated through eliminating 800 jobs throughout the company, or 7 percent of its workforce, according to the announcement. A majority of the job cuts will take place this quarter and the remainder, primarily through attrition, throughout 2007.
"The decision to reduce our workforce was a very difficult one to make, especially during the holiday season," said Joseph P. Campanelli, Sovereign president and chief executive, in the announcement. "There is never a good time to take these actions. We pledged to aggressively improve our business fundamentals and to openly communicate our decisions promptly. These steps are consistent with that pledge."
Sovereign will stop taking loan applications from brokers on Jan. 1, Schultz said.
Two other offices that currently serve Sovereign's wholesale mortgage business, in Pennsylvania and New York, will remain open and retain the wholesale employees. However, these offices will only serve the retail banking footprint moving forward, the spokesman added.
It is unclear whether any other mortgage-related jobs will be eliminated. Schultz said the company had no comment beyond the wholesale mortgage jobs at this point.
Sovereign said it expects total charges of $125 million to $140 million, pretax, related to the announced initiatives over the next several quarters.
"The next step in our business realignment program, which will be announced shortly, will be initiatives to rationalize our balance sheet to current industry conditions and our operating objectives of focusing on core operations and business fundamentals."
Ownit Mortgage Solutions went out of business, according to an e-mail it sent to its mortgage brokers last week. Ownit, which touted nonprime programs on its Web site, attributed the failure to current market conditions.
Wholesaler Sebring Capital Partners LP ceased operations earlier this month.
"We apologize for any inconvenience this may cause you or your borrowers," Sebring said on its Web site at the time..